🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

Commvault stock down as Guggenheim downgrades to 'neutral' on growth concerns

Published 10/15/2024, 08:32 PM
© Reuters.
CVLT
-

Investing.com -- Shares of Commvault Systems, Inc. (NASDAQ:CVLT) were down 3.6% in pre-open trade on Tuesday following a downgrade from Guggenheim Securities, which revised its rating on the data protection software company to "neutral" from "buy.” 

The downgrade came as the brokerage expressed tempered optimism about the stock's future performance, withdrawing its previous $160 price target. 

Guggenheim analysts noted that despite the strong year-to-date stock rally, near-term challenges have emerged, particularly within the company’s sales channels.

Commvault’s shares have surged by 113% this year, outperforming key industry benchmarks like the iShares Expanded Tech-Software Sector ETF, which rose 18% in the same period. 

However, analysts at Guggenheim flagged concerns about recent reseller performance, noting that four out of five partners failed to meet their third-quarter targets. 

Resellers pointed to increased scrutiny around deals and hesitation in corporate spending as key contributors to the weaker-than-expected finish to the quarter.

While full-year revenue targets remain intact for many resellers, the recent softness raises concerns about the company’s ability to deliver consistent growth. 

However, they flagged the company’s second quarter as a potential weak spot given its seasonally low performance and tighter corporate budgets across the sector.

Commvault's growth strategy includes a focus on cloud-native data protection and security solutions—two areas the company views as essential for future expansion. 

The company has recently made several deals, including Appranix and Clumio, which aim to bolster its capabilities in automated cloud recovery and cyber resilience, respectively. 

While these product initiatives are expected to drive growth, Guggenheim analysts caution that success in these segments requires market share gains in the highly competitive data protection space.

Despite recognizing Commvault’s solid positioning and promising product lineup, the analysts expressed concerns about valuation, citing an enterprise value-to-sales multiple of 7.1x and a 30.5x multiple on 2025 free cash flow projections. 

Given the premium valuation, Guggenheim recommended waiting for a more attractive entry point.

The downgrade comes ahead of Commvault's results, when the company is expected to provide further clarity on its performance outlook. 

Guggenheim underscores that the stock's future hinges on its ability to overcome near-term revenue headwinds while capitalizing on new growth areas in cloud security and SaaS backup services​

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.